DC Plan Sponsor Research - Executive Summary

Key Findings:

• Support remains high for DC pension plans in Canada, with few sponsors considering a major change. Only 4% of plan sponsors surveyed said they would be very likely to eliminate their organization´s pension plan, even if it was proven that the pension plan was ineffective in recruiting or retaining employees.
• Sponsors are generally satisfied with their plans, but educational deficiency is a key area of concern overall.

Q. How satisfied or unsatisfied are you with the following plan attributes? (based on a 10-point scale where 10 means "extremely satisfied")

• Plan sponsors are concerned about the threat of litigation. Other top concerns include lack of member involvement in retirement planning and lack of clear government regulations and government inertia, which contribute to fears about potential litigation.
• 53% of plan sponsors believe that educating their plan members is the most important and effective way to protect against litigation, yet only 11% of sponsors thought they were performing extremely well in this area.

Q. What are the most important ways to prevent against litigation and how well do you feel your organization is performing on each? (based on a 10-point scale where 10 means "extremely important" or "extremely well")

• The perceived threat of litigation is highest among those plan sponsors with greater assets under management ($50 million or more) and those who spend the most time managing their pension plans.
• Roughly one-quarter (24%) of respondents felt that their organization would face litigation within the next two years. Fully 40% of respondents felt that any judgments rendered from litigation would favour members over sponsors.
• The most likely planned changes to pension plans are in the areas of third-party advice and auto-enrollment.
• 23% of plan sponsors already provide independent, third-party advice to better serve their members. An additional 15% of sponsors expect to do so within the next ten years.
• Plan sponsors have low expectations of their members´ ability to retire when they want to, and of members´ knowledge and involvement in their retirement planning.

Q. Estimate the percentage of your main DC plan members who would fit these different descriptions.

• Plan sponsors are bullish on expected Canadian equity returns over the next decade, anticipating an average annual return of 8.1% on their S&P/TSX composite pension investments over the next ten years.

Methodology:

Telephone interviews were conducted with 120 sponsors of defined contribution plans with assets under management of $3 million or more. The research sample was geographically representative of DC pension plan distribution across Canada:

• West: 41%
• Ontario: 48%
• East: 11%

Interviews were conducted from November 19 to December 2, 2003, in the sponsor´s preferred language (English or French). Fieldwork was conducted by Q:Quest, a market research firm.

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